How Corporate Boards Can Solve the Pay Equity Issue

ON THIS EPISODE OF HIGH GROWTH MATTERS

As pay transparency laws sweep the nation intending to close the racial and gender pay gaps, pay equity has become a priority governance issue for corporate boards. 

In this episode, Kathie Ross, C-Suite Executive and Independent Director, shares where we’re at in the pay equity conversation, where we’re heading, and what we can do to improve our environments. 

Join us as we discuss: 

• The evolution of the pay equity conversation in recent years
• Current challenges boards face as they wrestle with pay equity
• The future of equity at work

LISTEN TO THE EPISODE

TRANSCRIPT

CAITLIN ALLEN: Hi, everyone. Welcome to another episode of high growth matters, the podcast sponsored by open comp. My name is Caitlin Allen, your co host and VP of Marketing at OpenComp. And today we are going to talk about pay equity as a governance issue for corporate boards. So as pay transparency laws have swept the nation we have laws coming out next week, being active in New York in less or just over two months in California and Washington. As those laws sweep the nation with the intention of closing the racial and gender pay gaps that we see today and have seen for decades, pay equity has become a priority governance issue for corporate boards. And so in this episode, we are speaking with Kathie Ross, the C suite executive and independent director who has extremely deep experience in human capital and corporate strategy. And in addition to serving on multiple boards like SHRM and OPEN Imperative, Kathie's served in C suite positions at public companies like Arbitron, which was acquired by Nielsen and private international companies like IBM, global and nonpartisan organizations like the United States Institute of Peace. So with that, Kathy, thank you so much for joining us.

KATHIE ROSS: It's great to be here today. Caitlin, thanks for including me.

CAITLIN ALLEN: Delighted to do it. So let's start off and get to know you perhaps just a bit personally, Kathy, would you mind telling us something about yourself that people don't often know about you?

KATHIE ROSS: Sure. I have to kind of laugh about this because very few people know this. Not everyone who's close to me knows that I'm an avid reader. Very few people know that I love the genre of true crime. I've always found it fascinating, but I will admit, I really binge on it during COVID. And, and then I discovered why I find it so interesting. Because I you know, although I'm a practitioner, I in my heart of hearts, I'm really a behavioral scientist. And so crime stories illustrate to me the power of both inductive reasoning and deductive reasoning. So if you think about Sherlock Holmes is inductive, you know, he gathers the facts and reaches a conclusion where Colombo is deductive, he comes up with a hunch, and then he'd be beacons following the data to kind of test that out. In both cases, first of all, I think they're both very valid ways of solving a problem. And in fact, in my coaching and consulting practice, I'm often working with people to help them understand how their brain works, how they process information, and also to respect how other people do the same but do it differently. In both, you know, especially in true crime stories, you know, the themes of curiosity and tenacity are front and center. And I think that those are so important in the current environment that we're in and both executives and boards.

CAITLIN ALLEN: I was just thinking that about how central that idea of being respectful of other ways of thinking and processing information is to the topic we're talking about today. So what a wonderful lead in. So we're obviously here to talk about pay equity, Kathy, and you have quite the depth of experience in the topic, how has it changed at the board level as a governance issue throughout your career?

KATHIE ROSS: It's changed significantly, Caitlin, honestly, I mean, it was not an issue for a long time. And in fact, both executives and boards are currently kind of in a perfect storm of issues that suddenly have become imperative for them to pay attention to dei transparency ESG. All of those are hitting both the C suite and the boardroom. So boards and executives are having to juggle a lot of things that have reputational risk associated with them are in the spotlight. And often rely on data that they do not have ready access to which is the reason I love open comp and open imperative. They don't have the information to be accurately addressing the issues that are confronting them.

CAITLIN ALLEN: And why what kind of information are they missing and what do they need to do in order to access it?

KATHIE ROSS: Well, this is going to be the challenge because I actually went back and looked at. So you know, every year or two boards asked management to share their EEO one report, which if you've looked at an EEO one report lately, you know, they started these in 1966. And I don't think they've really revised too much since then they're very superficial. You know, I mean, they're, you know, they're a good place to start. But we need to really work on disaggregating data and getting down to the level of detail where we really understand what our workforce looks like and where the problems are. So this has to do with a broad range of issues that address or an impact inclusivity that do not appear on an email list, and often are not on anybody's radar screen at the boardroom.

CAITLIN ALLEN: When isn't it even? It's not legal, necessarily to ask employees to divulge certain pieces of information as well, isn't that correct?

KATHIE ROSS: Yes, that is correct. i You referenced the sweeping legislative changes. This is one of the dilemmas is if you can't gather accurate data directly from the scores, which means talking to employees and finding out, you know, what their identity is composed of and how we can work on making that, you know, a natural and inclusive part of their work experience that it's, you know, it's a challenge, I think that that's going to change.

CAITLIN ALLEN: In what way would you predict?

KATHIE ROSS: I think that both society at large as well as regulators are going to start opening the door for employers to gather this kind of information so that they can begin working on real issues. And maybe it's an opt in. But I think that, you know, particularly with subsequent generations coming into the workforce. And if if there is transparency and trust with the executive management, I think the employees will welcome providing that information so that we can get at what's really going on in the workforce.

CAITLIN ALLEN: I agree with you on that. So then what are the top pay equity questions or challenges that boards are grappling with today in light of compensation, and leadership development and opportunity creation, and, you know, even hiring and recruiting?

KATHIE ROSS: i Yeah. I'll go back. And this is gonna be a broken record. Because again, the reason that I really love what OpenComp and OPEN Imperative are doing is we need data we need, we need concrete, realistic, actionable data. That's true in all of these areas that I mentioned, have become, you know, front of, you know, in the spotlight. So the EIA and ESG, we need to have a data so that we're having data driven decision making. And what that means is, the board needs to be asking the right questions. The board needs to be asking, what is the information that's being used to make decisions? Where's the information coming from? Who gets to participate and providing that information? So boards, I think, are going to begin to be far more sophisticated about what they are asking of management to provide. And to your point, it's going to be a challenge. I mean, it's, you know, back to my crime analogy, we have to be tenacious, tenacious, because these changes are actually up routing, decades of assumptions and experiences that are no longer relevant. So we really have to stay on it. And that's where I think boards can make a big difference in terms of asking the right questions and really probing what we're working on.

CAITLIN ALLEN: So deeply thrilling opportunity when you put it like that. And back to what you said about being a broken record. I'm a big believer that repetition is a golden opportunity to make the true that thinking so. So thank you for being that broken record. Circling back to what you said a bit about the questions they're asking, and where does my data come from? That that is a foundational part of the process. Are there any nuances you can point out for our listeners around their compensation data that they might traditionally have versus what they need to seek out instead that can equip their board to make more nuanced and on-point decisions?

KATHIE ROSS: Yeah, let me just reflect a conversation that I heard just recently among some stakeholders and board members. And you know this, we have to be prepared for the fact that as we gather data and present it to stakeholders, there will be pushback and defensiveness. That's just we need to anticipate that. So this was an example where one of the stakeholders was were saying, these are not the categories that I'd be paying attention to at all. And the board member says, So tell me what you would be paying attention to. And I'll cut the data that way. We need to be prepared to look at this through multiple number of lenses, and work collaboratively with people who are skeptical, or who are scared about what the data is going to, you know, tell them about their organizations and about their past practices. So yeah, tell me what categories you'd use on behind the happy to go back and use those categories, and do the same analysis on your categories as the ones I used.

CAITLIN ALLEN: That's a really good point I, before I started in this role over about a year and a half ago, I knew for instance, it mattered that I could understand the nuances between company stages, right? Like, as far as VP of Marketing makes different than a series B. And sometimes a series a VP of Marketing and fintech might make a different amount, then, I don't know what currency. But what was what's been very interesting to me that shocked me, and also been kind of a excuse, the phrase, but uh, no data to realize, since I've started this position is how much of pay inequity exists when you take a deeper look at not just men versus women within your organization, but say, at different levels of seniority, or department, by department, and, you know, maybe even by underrepresented groups versus more representative groups. And, and that's it probably shouldn't have shocked me, but it really has about the differences that are there. And so I really hope that that is something that boards can help champion a new lens of focus on, because I think once once that championship comes from the top down, it's sponsored. Right? It's it's easier to ubiquitous as well, totally.

KATHIE ROSS: And I also think that it can be presented and pursued and explored through the lens of what is long term growth, sustainable, long term growth look like, you know, I think that we have to be very pragmatic. And even though I, personally am totally committed to this is the right thing to do, we should have done it a long time ago. This, this will impact the long term sustainability of our businesses. And it's not going to be something we're going to change overnight. So we've got to be relentless about, you know, looking at all the data. I agree with all the categories that you've mentioned, I think age is a big driver of inequity within organizations, young people are not, they're not invited to the influencers. They're probably underpaid in many, many cases. Likewise, older people are often often shuttled out. So, you know, again, I just think we're beginning to touch the tip of the iceberg, if you will, about all of the categories that we really need to look at these issues through. Yes, yes. And

CAITLIN ALLEN: I think you make a very important point around connecting this new business initiative to business outcomes, right? We have early statistics around the improvement of retention, or market competitiveness when companies prioritize Dei, but there aren't many similar stats around pay equity yet. And so those I'm excited to see come into play. And that comment actually is a transition a bit into my next question, because it's related, but how do you advise boards Kathy to develop their pay equity strategy, maybe even through the lens of a crawl, walk, run approach as we formalize things?

KATHIE ROSS: Well, first, I think it's important to point out that boards really don't make strategy. Management makes strategy. And then boards can advise can, you know, explore and ask the right questions. And so I think that you're, you've, you've touched on it that you have, we have to look at the industry, the lifecycle of the organization, and we have to insist that there be some planning and processes around that, even if they're not in a position to immediately implement those. So I'm working with a number of startups right now. They've, they're small, they're a handful of numbers. But they can start thinking about when they scale, you know, how can they, in advance of that create a talent pool that really is equitable, and again, ensures the growth of the company. And so you know, I've worked with a couple of them saying, you know, make a shortlist of people in your field that you know, women who you think would be a huge value add to your company, and start developing a relationship with them, take them to dinner. You're not ready to hire them. You don't know when that might be. But you can certainly start developing a relationship with them. I'll also share our best practices, Arbitron instituted, and I will say Arbitron way ahead of, you know, norms as a radio company had a very diverse board. And before every board meeting, we invited key people to have dinner with the board so that the board would begin to see the leadership team underneath Meet the executive team and give exposure and visibility to particularly women and underrepresented members of our team. And that was huge.

CAITLIN ALLEN: That is really big. And it's also so simple and easy to implement in some ways, too, which is why it's brilliant. Yeah, very ahead of it's time. One question we've heard a lot from CEOs in particular recently, Kathy, and I imagine you might have some insight to this, given your work with startups is, what if I've found pay equity pay inequities? And I can't afford to them right now, what do we do?

KATHIE ROSS: I mean, this is the quintessential problem. And I think this is what people are most nervous about. And again, it's going to be a long term issue, and you can take baby steps, but you got to be doing something, you can't just do nothing. So yeah. You know, again, there are a variety of strategies that can work in terms of, you know, even deferred comp or promises, or future recognition and compensation, if you can't afford to do it. Now you enter into a contractual arrangement where that will be available when the company can afford it. But makes visible the fact that you're taking this seriously, and you're doing something about it.

CAITLIN ALLEN: Great advice. Great advice. Rounding out our conversation with the last couple of questions. You've already given some great examples around how you see different companies innovating, taking future leaders out to dinner, exposing their second layer of leadership to the board, what are other things that you see happening that are exciting, and that are pioneering this area?

KATHIE ROSS: Well, I mean, if this has, this is a double edged sword, but I will share with you I can I think that the whole notion of social responsibility among corporations, is on the rise and is visible and important to shareholders. But I think it's important for the board to get to know and understand shareholders and what they're expecting, because I think, I think that there are a lot of antiquated assumptions about, you know, shareholders only want to make money. And that's the priority and everything else kind of falls by the wayside. I don't think that that's true anymore, at least, not always. So this, again, it gets back to what is the date, give me the data, you know, give me the information that will actually help me make informed decisions, including, I mean, not only is so underneath the pay disparity that we're trying to address, is kind of the whole notion of the power distribution, and decision making. Because that often is what drives the pay inequity is that the power distribution is so concentrated in one category. And so finding ways to really expand that, and then use that to drive compensation strategies and practices, I think, is important.

CAITLIN ALLEN: Thank you. What would you say from your vantage point, your your qualified vantage point, what does the future of pay equity governance look like?

KATHIE ROSS: Well, I think that there will be a confluence of both regulatory changes that we're already see, we already see anything. I'll be honest with you, I don't think that that is necessarily going to be the biggest impetus, I think the biggest impetus is you're not going to attract talent, if you cannot be transparent, and show people what it is you're doing to address these problems. You know, particularly young workers entering the workforce, they are going to prioritize transparency and purpose and social responsibility as real drivers of where they're going to go to work. And so I think that there's going to be a confluence of both kind of societal changes that are going to insist on looking at these issues, as well as some regulatory changes.

CAITLIN ALLEN: That's a really good point, and I think is particularly the case for younger generations where work has, it has a new meaning for them in the context of their lives. And the importance of transparency and impact and mission driven work is much more at the forefront of their minds, you make a very valid point. Before I asked your last question, I'd like to let the audience know Kathy is on. She recently joined the open imperative board and I know we've talked about this before you too can join that that organization. It's a group of pre IPO companies that are taking a stand to say that there will be no more pay disparity in their organizations by 2027. So less than five years from now. And by joining you can do so for free. You get in return VIP access to educational content event as access to experts like Kathy and and you also receive a free pay equity report, which is something states like California will be getting requiring next year. So just wanted to, to invite you to join us there that that link will be in the show notes. And Kathy, our last question is usually the same. And it's what's the most important thing in your opinion that we've discussed today, that if you could ask our listeners to act on you would do so?

KATHIE ROSS: Well, I just love the tagline of outcomes over intent. You know, we've we've expressed intent for a long time, it's gotten us nowhere. So back to my broken record, get the data, you know, begin asking questions about the data that you need in order to be informed about what's really going on, because that's what's going to get us to outcomes versus platitudes. 

CAITLIN ALLEN: Totally, and it's a perfect first step. So speaking of crawl, walk, run. Yeah, this has been such an enjoyable conversation. Thank you for making time to have it

KATHIE ROSS: For me as well.